How are expense reimbursements processed in Saudi Arabia?

TABLE OF CONTENTS

• Invoicing & Documentation
• Travel & Mileage
• Reimbursement & Taxability
• VAT Considerations

Horizons employees in Saudi Arabia may incur work-related expenses in the course of business. This guide outlines how expenses are handled, what documentation is required, and the applicable tax rules in Saudi Arabia.

Invoicing & Documentation

• Documentation required:

  • All business expenses must be supported by invoices or receipts. Proof of payment is mandatory. 

  • E-invoices must comply with ZATCA requirements:
    ZATCA – E-Invoicing

• Invoice threshold:

  • There is no threshold. All services and expenses must be invoiced under ZATCA rules:
    ZATCA Rules & Regulations

Travel & Mileage

• Mileage reimbursement:
  Saudi Arabia does not mandate a statutory mileage rate. Companies may:

  • Adopt a fixed rate per kilometre, or

  • Reimburse actual fuel and maintenance expenses with receipts.
    Rates must align with the company’s internal policy.

• Parking tickets & tolls:
  Treated as separate expenses, supported by receipts. Not combined with mileage logs unless otherwise specified in company policy.
  • More details about parking: Mawgif

• Business travel restrictions (Article 58 of the Saudi Labor Law):

  • Employers may assign employees to a different location for up to 30 days per year without employee consent.

  • Employers are responsible for transportation and accommodation costs.

  • The law does not set fixed reimbursement amounts; costs must be reasonable based on market rates.

• Modes of travel:
  No legally mandated rules. Clients set their internal policies to define acceptable modes of transport, travel classes (e.g., economy vs. business), and limits.

Reimbursement & Taxability

• Business expenses:
  In Saudi Arabia, all business expenses are considered taxable for VAT purposes. Examples:

  • Airline tickets

  • Parking fees

  • Gasoline

  • Accommodation

  • Meals

• Per diems:

  • There are no statutory per diem rates in Saudi Arabia.

  • Companies may set their own policies for national or international travel.

  • Per diems paid directly to employees are subject to VAT, as they are treated as income.

• Client entertainment & gifts:

  • Entertainment and gifts provided through vendors are subject to tax.

  • Companies should ensure such expenses remain reasonable and business-related.

• Health & wellness expenses:

  • Employers are required by law to provide a medical insurance policy for employees.

  • Employees must submit medical claims directly to their insurance provider.

  • Other wellness-related expenses (e.g., gym memberships, yoga, therapy) are not typically reimbursable, unless specifically allowed by company policy.

VAT Considerations

• VAT applies to all reimbursable expenses in Saudi Arabia.

• If the client is VAT-registered in KSA, VAT may be reclaimed provided the invoice complies with ZATCA rules and clearly states the nature of the expense.